8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8‑K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 20, 2019

AXT, INC.

(Exact name of registrant as specified in its charter)

Delaware	000‑24085	94‑3031310
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

4281 Technology Drive

Fremont, California 94538

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:  (510) 438‑4700

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8‑K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

◻ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

◻ Soliciting material pursuant to Rule 14a‑12 under the Exchange Act (17 CFR 240.14a‑12)

◻ Pre-commencement communications pursuant to Rule 14d‑2(b) under the Exchange Act (17 CFR 240.14d‑2(b))

◻ Pre-commencement communications pursuant to Rule 13e‑4(c) under the Exchange Act (17 CFR 240.13e‑4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Item 2.02 Results of Operations and Financial Condition

On February 20, 2019, AXT, Inc. issued a press release announcing its financial results for the quarter and fiscal year ended December 31, 2018.  A copy of the Company’s press release, announcing the results, is attached hereto as Exhibit 99.1 and incorporated herein by reference.

The information in Exhibit 99.1 hereto discussing the Company’s results of operations and financial condition for the quarter and fiscal year ended December 31, 2018, is being “furnished” in accordance with General Instruction B.2 of Form 8‑K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.  The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing.

Item 9.01 Financial Statements and Exhibits

(d)       Exhibits

99.1     Press release dated February 20, 2019, regarding the financial results of AXT, Inc. for the quarter and fiscal year ended December 31, 2018.

EXHIBIT INDEX

Eptem
Exhibit Number	Description
99.1	Press release dated February 20, 2019, regarding the financial results of AXT, Inc. for the quarter and fiscal year ended December 31, 2018.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	AXT, INC.
Date:  February 20, 2019	By:	/s/ Gary L. Fischer
		Gary L. Fischer
		Chief Financial Officer and Corporate Secretary

EX-99.1

	Exhibit 99.1
	AXT, Inc. Fourth Quarter and Year End 2018 Results
	February 20, 2019
	Page 1 of 5

AXT, Inc. Announces Fourth Quarter and Fiscal Year 2018 Financial Results

FREMONT, Calif., February 20, 2019 – AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound semiconductor substrates, today reported financial results for the fourth quarter and fiscal year, ended December 31, 2018.

Fourth Quarter 2018 Results

Revenue for the fourth quarter of 2018 was $22.2 million, compared with $28.6 million in the third quarter of 2018 and $26.3 million for the fourth quarter of 2017. 

Gross margin was 26.3 percent of revenue for the fourth quarter of 2018, compared with 37.1 percent of revenue in the third quarter of 2018 and 37.2 percent for the fourth quarter of 2017.

Operating expenses were $6.5 million in the fourth quarter of 2018, compared with $6.3 million in the third quarter of 2018 and $6.1 million for the fourth quarter of 2017. 

Operating loss for the fourth quarter of 2018 was $0.6 million compared with operating profit of $4.3 million in the third quarter of 2018 and $3.7 million for the fourth quarter of 2017.  

Interest and other, net was a loss of $0.4 million for the fourth quarter of 2018, compared with a gain of $0.2 million in the third quarter of 2018 and a loss of $0.3 million for the fourth quarter of 2017.  Interest and other, net for the fourth quarter of 2018 included interest earnings of $0.1 million, a foreign exchange gain of $0.4 million, other income of $0.1 million and a net loss of $1.0 million from the seven partially owned companies in the company’s supply chain accounted for under the equity method.

Benefit from income taxes in the fourth quarter of 2018 was $0.2 million compared with a provision for income taxes of $0.4 million in the third quarter of 2018 and $0.1 million for the fourth quarter of 2017.

Net loss attributable to AXT in the fourth quarter of 2018 was $1.1 million, or $0.03 per share, compared with net income attributable to AXT of $3.9 million or $0.10 per diluted share in the third quarter of 2018 and $3.1 million or $0.08 per diluted share for the fourth quarter of 2017.

AXT, Inc. Fourth Quarter and Year End 2018 Results
	February 20, 2019
	Page 2 of 5

Fiscal Year 2018 Results (January 1 to December 31)

Revenue for fiscal year 2018 was $102.4 million, compared with $98.7 million in fiscal year 2017. 

Gross margin for fiscal year 2018 was 36.2 percent of revenue, compared with 34.9 percent of revenue in fiscal year 2017.

Operating expenses for fiscal year 2018 were $24.9 million, compared with $21.8 million in fiscal year 2017.

Net interest and other income for fiscal year 2018 was a loss of $0.2 million, compared with a loss of $1.8 million in fiscal year 2017.

Income tax expense for fiscal 2018 was $0.9 million compared with $0.8 million in fiscal year 2017.

Net income attributable to AXT in fiscal year 2018 was $9.7 million, or $0.24 per diluted share, compared with a net income of $10.1 million, or $0.26 per diluted share, in fiscal year 2017. 

Management Qualitative Comments

“2018 was a mixed year for AXT,” said Morris Young, chief executive officer. “Global economic conditions were made more difficult by the uncertainty of trade tensions, and spending in certain end markets took a pause, impacting our expected growth and profitability for the year. Despite these challenges, our indium phosphide revenue set another record in 2018, and we saw growth in a host of new gallium arsenide applications that further suggest this material is entering its next period of expansion. In 2018, AXT achieved every major milestone established in the relocation of our gallium arsenide and germanium product lines.  Although Q1 2019 is challenging, as we look to the year ahead we are encouraged that the tone of customer comments includes an expectation for market recoveries later this year. We believe our competitive position remains strong, and that this will enable us to return to growth when the markets recover. In the meantime, we intend to continue the relocation, strengthen our business and drive greater efficiencies in our model.”

Conference Call

The company will host a conference call to discuss these results today at 1:30 p.m. PT. The conference call can be accessed at (844) 892-6598 (passcode 9999917). The call will also be simulcast on the Internet at www.axt.com. Replays will be available at (855) 859-2056 (passcode 9999917) until February 26, 2019. Financial and statistical information to be discussed in the call will be available on the company's website immediately prior to commencement of the call. Additional investor information can be accessed at http://www.axt.com or by calling the company's Investor Relations Department at (510) 438-4700.

AXT, Inc. Fourth Quarter and Year End 2018 Results
	February 20, 2019
	Page 3 of 5

About AXT, Inc.

AXT designs, develops, manufactures and distributes high-performance compound and single element semiconductor substrates comprising indium phosphide (InP), gallium arsenide (GaAs) and germanium (Ge) through its manufacturing facilities in Beijing, China.   AXT’s worldwide headquarters are in Fremont, California where the company maintains its sales, administration and customer service functions.  The company’s substrate products are used primarily in lighting display applications, wireless communications, fiber optic communications and solar cell applications. Its vertical gradient freeze (VGF) process technology for manufacturing semiconductor substrates provides significant benefits over other methods and enabled AXT to become a leading manufacturer of such substrates. AXT has manufacturing facilities in China and, as part of its supply chain strategy, has partial ownership in ten companies in China producing raw materials. For more information, see AXT’s website at http://www.axt.com.

Safe Harbor Statement

The foregoing paragraphs contain forward-looking statements within the meaning of the Federal securities laws, including, for example, statements regarding the market demand for our products, our growth prospects and opportunities for continued business expansion, our market opportunity, our relocation and our expectations with respect to our business prospects and financial results. These forward-looking statements are based upon assumptions that are subject to uncertainties and factors relating to the company’s operations and business environment, which could cause actual results to differ materially from those expressed or implied in the forward-looking statements contained in the foregoing discussion. These uncertainties and factors include but are not limited to:the timing and receipt of significant orders; the cancellation of orders and return of product; emerging applications using chips or devices fabricated on our substrates; end-user acceptance of products containing chips or devices fabricated on our substrates; our ability to bring new products to market; product announcements by our competitors; the ability to control costs and improve efficiency; the ability to utilize our manufacturing capacity; product yields and their impact on gross margins; the relocation of manufacturing lines; possible factory shutdowns as a result of air pollution in China; the financial performance of our partially owned supply chain companies; policies and regulations in China and other factors as set forth in the company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q and other filings made with the Securities and Exchange Commission.  Each of these factors is difficult to predict and many are beyond the company’s control. The company does not undertake any obligation to update any forward-looking statement, as a result of new information, future events or otherwise.

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FINANCIAL TABLES TO FOLLOW

AXT, Inc. Fourth Quarter and Year End 2018 Results
	February 20, 2019
	Page 4 of 5

AXT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

	Three Months Ended				Year Ended
	December 31,				December 31,
	2018		2017		2018		2017
Revenue	$	22,232	$	26,332	$	102,397	$	98,673
Cost of revenue		16,382		16,534		65,350		64,198
Gross profit		5,850		9,798		37,047		34,475
Operating expenses:
Selling, general and administrative		5,179		4,790		19,003		17,009
Research and development		1,309		1,274		5,897		4,827
Total operating expenses		6,488		6,064		24,900		21,836
Income (loss) from operations		(638)		3,734		12,147		12,639
Interest income, net		114		127		528		461
Equity in loss of unconsolidated joint ventures		(1,059)		(307)		(1,080)		(1,694)
Other income (expense), net		531		(150)		352		(553)
Income (loss) before provision for income taxes		(1,052)		3,404		11,947		10,853
Provision for (benefit from) income taxes		(173)		131		938		792
Net income (loss)		(879)		3,273		11,009		10,061
Less: Net (income) loss attributable to noncontrolling interests		(182)		(139)		(1,355)		87
Net income (loss) attributable to AXT, Inc.	$	(1,061)	$	3,134	$	9,654	$	10,148
Net income (loss) attributable to AXT, Inc. per common share:
Basic	$	(0.03)	$	0.08	$	0.24	$	0.27
Diluted	$	(0.03)	$	0.08	$	0.24	$	0.26
Weighted-average number of common shares outstanding:
Basic		39,197		38,766		39,049		37,444
Diluted		39,197		40,448		40,265		38,966

AXT, Inc. Fourth Quarter and Year End 2018 Results
	February 20, 2019
	Page 5 of 5

AXT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

	December 31,		December 31,
	2018		2017
ASSETS
Current assets:
Cash and cash equivalents	$	16,526	$	44,352
Short-term investments		22,129		20,032
Accounts receivable, net		19,586		22,778
Inventories		58,571		45,840
Prepaid expenses and other current assets		11,728		7,519
Total current assets		128,540		140,521
Long-term investments		717		12,576
Property, plant and equipment, net		82,280		46,530
Other assets		11,987		11,573
Total assets	$	223,524	$	211,200
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,338	$	11,445
Accrued liabilities		15,371		11,149
Total current liabilities		28,709		22,594
Other long-term liabilities		283		289
Total liabilities		28,992		22,883
Stockholders’ equity:
Preferred stock		3,532		3,532
Common stock		39		39
Additional paid-in capital		234,419		231,679
Accumulated deficit		(45,183)		(54,837)
Accumulated other comprehensive income (loss)		(1,972)		3,407
Total AXT, Inc. stockholders’ equity		190,835		183,820
Noncontrolling interests		3,697		4,497
Total stockholders’ equity		194,532		188,317
Total liabilities and stockholders’ equity	$	223,524	$	211,200